Futures contract - direct exposure to commodities?

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cfa_student29

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I thought actually purchasing the asset is the only direct exposure.. but it seems futures provide direct exposure.. can someone explain why futures provide direct while stock dont.. which are the other ways of direct exposure
 
direct exposure; cash or deriv .. you either own the physical commodity or a direct future on the commodity.
indirect: you buy a company’s stock who’s in the commodities business (oil, wheat, gold etc..)
Indirect are more common although they are not affected by price movements.
 
well etfs are passive indexed equities .. thus i believe if you have an equity position in an etf then its indirect. i’d appreciate other’s opinion about this one.
 
I still have not been able to identify a concrete answer on the ETF question. Quite annoying actually. I am going to just assume only physically purchasing and via futures are considered “direct”
 
Yes - I think it’s any contractual arrangement that sets you up to transact in whatever it is you’re talking about exposure to (long/short/forwards/options/futures/swaps).
As for the etf-if think it depends on what’s in the fund. If it’s a gold eft that holds bullion and futures only I’d say you have direct exposure. But if it’s gold miners and producers or companies in the supply chain, then not. If mixed-holds futures and miners, probably proportional direct exposure. But…I don’t recall seeing anything about ETFs…did I miss something?
 
1. Indirect exposure is through stocks of companies that deal with commodity business. This may not be an effective investment as these companies often hedge their exposure to commodity prices.
2. Curriculum says nothing about ETFs on commodities or anything similar. I doubt it exists - haven’t seen it personally.
 
cfa_student29 wrote:
what about ETF’s
Click to expand...
depends:
GLD = direct
GDX = indirect
Both are etfs. the former creates synthetic gold exposure using derivatives. The latter invests in gold mine operators, which are levered to to gold prices.
 
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